Eurex Clearing

The Future of
Central Clearing
Maximizing capital and cost efficiency
through an integrated cross-product
CCP clearing service
Analysis commissioned to and conducted by
Table of contents
03
Introduction
04
Executive summary
05
Global regulations fundamentally
transforming financial markets
06
Optimizing economics through
integrated clearing
08
Sizing the opportunity
14
Conclusion
15
Sources
16
About us
17
Contacts
Introduction
In 2009 the G20 announced a plan to
the same time increasing market safety.
resulting shifts in clearing models and
strengthen the international financial
In a nutshell, it offers increased netting,
economics and gauges the cost-saving
system, with an emphasis on building
default fund and collateral efficiencies
potential of integrated cross-product
high quality capital and improving
with an integrated cross-product model,
clearing in client case studies, based on
over-the-counter (OTC) derivatives
a large spectrum of eligible collateral,
analysis and calculations conducted by
markets. This initiated various new
the possibility to reuse assets (e.g.
Oliver Wyman. The study focuses on
regulations in the U.S., EU and else-
GC Pooling) and access to central bank
capital and cost differentials in the mid-
where, as well as major investments by
money, thereby lowering economic
term, assuming the new regulations
banks, investment managers, clearing
costs for clearing.
will be implemented with a view to
houses, custodians, execution plat-
incentivizing the use of central clearing
forms and data providers. As a result,
This study reviews the new regulations
both OTC and listed derivatives as well
impacting derivative and securities
as securities financing (repo, securities
financing markets; it highlights the
in order to support the G20 agenda.
We hope you enjoy reading.
lending ) business will be subject
to substantially higher capital and
collateral requirements. Given these
Exhibit 1: Integrated cross-product clearing model of Eurex Clearing
increasing costs for market participants,
it is critical for CCPs to deliver safety
and efficiency to enable market partici-
Netting efficiency
pants to better adapt to the changed
regulatory environment.
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Eurex Clearing has been actively
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Executive summary
• The global regulatory agenda con-
• The quantitative case studies in this
tinues to deepen capital and collateral
paper confirm cost benefits of cen-
requirements for derivatives and
trally cleared over bilateral trades for
securities financing transactions,
most portfolios in a regulatory base
particularly for bilateral trades.
case scenario, and also show that
Eurex Clearing, an integrated cross-
• Central clearing will likely create
product CCP with a broad collateral
sustained cost benefits which, how-
spectrum, can increase cost savings
ever, will vary substantially across
substantially, by reducing risk expo-
CCPs – driven by netting, default
sures irrespective of the final regula-
fund and the collateral efficiencies
tory outcome.
different CCPs can provide.
Integrated cross-product CCPs with
• For interest rate derivatives, repo
a broad eligible collateral spectrum –
and securities lending transactions,
such as Eurex Clearing, clearing
an integrated cross-product CCP
multiple listed and OTC products
structure with a broad collateral spec-
and asset classes through a single
trum can deliver up to EUR 4 – 5
legal structure and platform – will
billion incremental cost benefits to
generate increased efficiencies and
the European sell- and buy-side
superior economics for clients.
community combined, on top of
EUR 5 – 7 billion cost benefits of
• Sell- and buy-side participants alike
central clearing on a baseline CCP
can substantially improve capital
which are to a certain degree
and cost efficiencies by actively
already realized.
pooling clearing business across
products on integrated CCPs. Eurex
Clearing is the natural hub for
of exposures becomes a strategic
EUR-denominated equity as well as
decision for sell- and buy-side
interest rate derivatives such as
participants as they optimize capital
OTC IRS, Bund, Bobl, Schatz and
and cost efficiencies through inte-
Euribor futures, as well as repo
grated clearing.
and securities lending transactions.
4
• The choice of CCP and allocation
Global regulations
fundamentally transforming
financial markets
Strengthening the resilience of financial
4. FSB Securities Lending and Repo
additional collateral and client clearing
markets is a major objective of the
framework: Includes consultative
activities from a capital perspective.
global regulatory reforms to the finan-
proposals on minimum standards
It remains to be seen which changes
cial crisis, increasing transparency,
for methodologies to calculate
will be implemented as proposed.
reducing risks and shifting unregulated
haircuts on non-centrally cleared
The quantitative case studies below
products onto regulated venues and
securities financing transactions
are assuming a mid-term base-case
infrastructures. More emphasis is being
and a framework of numerical
scenario, based on the new proposals
brought to bear upon the use of
haircut floors.
capital, collateral and central counter-
implemented with necessary modifications to incentivize use of the central
parties in these transactions. Five main
5. EMIR: Primarily focuses on ensuring
sets of regulation are being introduced
that risks around OTC derivatives
in EU jurisdictions for this purpose:1
are managed effectively. Specifically,
clearing model in order to support
the G20 agenda.
EMIR requires all standardized OTC
1. Basel III / CRD IV: Deepens capital
requirements for counterparty credit
derivative contracts to be cleared
via central counterparties (CCPs),
risks for derivatives and securities
formulates common rules for CCPs,
financing transactions.
and regulates trade reporting.
2. CPSS /IOSCO principles: Introduces
The final form of these regulations –
standards for default fund require-
particularly of Basel III – is still uncertain,
ment calculations for CCPs amongst
with several proposals under con-
a set of principles for financial
sultation. The capital treatment of
market infrastructures.
banks’ contributions to default funds
is proposed to be based on a new
3. BCBS /IOSCO margin requirements:
standardized approach to measure
Proposes initial and variation margin
exposures as well as stress test calcu-
requirements for non-centrally
lations using CPSS / IOSCO standards
cleared derivatives, subject to certain
(“cover stress tests”) which may signifi-
conditions.
cantly increase capital requirements.
The leverage ratio methodology as
currently proposed could substantially
penalize the use of initial margin,
1
See sources of the main sets of regulation at the end of the document.
5
Optimizing economics
through integrated clearing
OTC derivative transaction models
for selected products, enforced via
the capital requirements further
have evolved over time. Historically
a clearing obligation. Similarly, the use
decreased by lower risk weights (2%
most dealer-to-client OTC derivative
of a CCP is becoming more common
vs. 20 – 100%+) and no CVA VaR
transactions were completed on
for securities financing transactions.
charge. These reductions are partially
offset by increasing requirements for
a bilateral basis without exchanging
initial margin.2 As counterparty credit
There are a number of economic
risk exposures in these transactions
benefits pertaining to central clearing
default fund contributions.
tend to be high, a shift to the use of
compared to the bilateral model,
Economics of participants across
initial margin can be observed in
which tend to make CCP trades sub-
clearing models are driven by capital
bilateral transactions, especially since
stantially more efficient for participants:
the financial crisis. In the interdealer
costs, funding costs, credit value
adjustments, fees (such as CCP and
market, these transactions are already
• Reduced capital requirements
client clearing fees) and variations
widely complemented by the use of
• Reduced funding requirements
in mark-ups on bid-ask spreads as
a central counterparty (CCP) which
• No credit value adjustments (CVA)
steps in between the two parties
a result of the underlying differences
in costs. Exhibit 2 summarizes the key
to further reduce and manage risks.
The reduced capital and funding
Driven by the regulatory requirements
requirements are driven by multilateral
economic differentials across models.
described above, central clearing is
exposure netting, shorter margin
now economically encouraged – and,
periods of risk (5 vs. 10 + days), with
Exhibit 2: Summary of client economics across clearing models under the changed regulatory framework
Bilateral model without
initial margin b
Capital costs
High
Bilateral model with initial
margin (two-way) b, c
Central clearing model
Medium/low
Medium/low
Low
High
Medium/low
High
Medium/low
No
High
Low
Funding costs a
Credit value adjustment (CVA)
Fees and bid-ask spread
High
a) Funding costs for initial margin only, not for collateral against cash/securities borrowed/lent in securities financing transactions
b) Bilateral model with or without tri-party set-up involving a tri-party agent for collateral management purposes
c) Model only relevant for derivatives, not securities financing transactions
2
6
In most cases variation margin is exchanged to reflect the current exposure of the transaction.
Cost efficiencies of central clearing,
It is important to note that these
EUR-denominated products in the fixed
however, may vary substantially
cost efficiencies are driven by
income and equity space (see Exhibit 3
across different CCPs – along three
corresponding reductions in risk
for illustration).
key drivers:
exposures (through portfolio
1. Netting efficiency: CCPs clearing
netting), and are not a function of
Combining single offsetting OTC and
weakening risk management.
listed interest rate derivatives in
the same currencies on an integrated
different products under a single
legal netting agreement and liqui-
Eurex Clearing is an integrated cross-
CCP leads to substantial initial margin
dation structure can lower capital
product CCP with a broad eligible
reductions for these trades – of up to
and funding requirements through
collateral spectrum, clearing multiple
60 – 80%. Also in a multi-currency
cross-product exposure netting and
products and asset classes through
swap portfolio context, cross-product
cross-margining for cleared trades.
a single legal structure and platform.
margining benefits within an asset
This entails the highest efficiency
class outweigh cross-currency benefits.
potential for market participants.
Cross-product margining benefits
2. Default fund efficiency: CCPs with
integrated cross-product and asset
Participants can substantially improve
are expected to become even more
class structures can offer lower
their economics by combining clearing
important in the future, with the latest
default fund capital and funding
business in particular in the same cur-
regulatory proposals ruling out cross-
requirements for cleared trades.
rency on an integrated CCP. Clearing
currency correlations to a large degree
the broadest scope of products under
(e.g. the new Basel standardized
3. Collateral efficiency: CCPs with
a single framework in Europe – listed
approach for exposure and default
a large spectrum of eligible col-
and OTC derivatives, repo and securities
fund calculations).
lateral, reuse of other assets (e.g.
lending transactions – and accepting
GC pooling) and access to central
a large spectrum of eligible collateral,
bank accounts can lower funding
Eurex Clearing is a natural hub for
requirements.
European portfolios, particularly for
Exhibit 3: Increasing cost efficiencies on Eurex Clearing
Short-term listed
interest rate derivatives
(e.g. Euribor, Schatz)
• Integrated,
segmented structure
• Diversified
member base
• Other asset classes
such as equities
Securities lending
transactions
▼
▼
Collateral
Integrated CCP
with a single legal
framework
and platform
OTC interest rate
derivatives
Repo transactions
(e.g. GC Pooling)
▼
Long-term listed
interest rate derivatives
(e.g. Bund, Bobl)
2. Default fund efficiency
▼
CCP positions
1. Netting efficiency
▼
▼
Broad collateral spectrum and collateral reuse capabilities
3. Collateral efficiency
7
Sizing the opportunity
In order to quantify the capital and
rate products (such as exchange-traded
Derivatives case studies
cost efficiency opportunity on an inte-
derivatives, cleared repo and securities
The first set of case studies is based on
grated CCP such as Eurex Clearing
lending transactions), quantifying cost
selected illustrative sell- and buy-side
in the new regulatory environment,
savings of central clearing as well as
firm examples, representing different
the analysis considers a range of de-
the additional efficiencies on an inte-
business models, to gauge the size
rivatives and securities financing case
grated CCP. The securities financing
and range of cost savings for deriva-
studies. The derivatives case studies
case studies analyze cost efficiencies
tives clearing. Exhibit 4 provides
analyze sell- and buy-side firms moving
of moving bilateral securities financing
an overview on approach and scope.
bilateral OTC portfolios onto a CCP
transactions onto the different
and pooling these with other interest
CCP models.
The sell-side case studies consider
a global dealer (investment bank) and
a regional bank, both with sizeable
Exhibit 4: Overview of derivative case study approach and scope
OTC interest rate derivatives portfolios,
including client clearing activities.
Approach
Cost savings
of clearing
over bilateral
with initial
margin on
a baseline CCP
Additional
benefits on
an integrated
CCP such as
Eurex Clearing
Scope
Exhibit 5 (on page 9) summarizes
the cost savings of central clearing,
• Capital costs
• Funding costs
• CVA
• Fees and bid-ask
spread
Global dealer
(self and client clearing)
Sell-side
Regional bank
(self and client clearing)
taking into account capital and funding
costs as well as CVA, assuming the
complete OTC interest rate derivatives
portfolios is moved from a bilateral
• Netting efficiency
• Default fund
efficiency
• Collateral efficiency
Fixed income
mutual fund
Buy-side
Fixed income
hedge fund
with initial margin to a central clearing
model. In order to account for differences in efficiencies between CCPs,
the savings are shown for a baseline
CCP with product siloes and narrow
collateral spectrum compared to
an integrated cross-product CCP with
a broad collateral spectrum such as
Eurex Clearing, quantifying the additional cost efficiencies outlined above.
8
Exhibit 5: Sell-side cost savings of clearing over bilateral with initial margin (bps of notional)
Global dealer
Regional bank
Cost efficiency drivers
+50 –75% ~ 0.3 – 0.35 bps
1. Netting
efficiency
Cross-product exposure
netting and
cross-margining
2. Default
fund
efficiency
Integrated, segmented
default fund structure
3. Collateral
efficiency
Large eligible collateral
spectrum, reuse of assets &
central bank access
+65 –100% ~0.25 – 0.3 bps
1
1
2
~0.2 bps
2
3
~0.15 bps
3
Savings on
a baseline
CCP
Additional
cost
efficiencies
Savings on
Eurex
Clearing
Savings on
a baseline
CCP
Additional
cost
efficiencies
Savings on
Eurex
Clearing
By moving their portfolios from a bilat-
the bilateral client legs due to the banks
The buy-side case studies consider
eral set-up with initial margin onto
acting as clearing brokers. Funding and
the economics of a range of buy-side
a baseline CCP, banks can lower costs
CVA benefits are somewhat offset by
firms including a fixed income mutual
and save an estimated ~0.15 – 0.20 bps
increased capital costs because of the
fund and a fixed income hedge fund.
of gross notional (of the OTC interest
default fund capitalization requirements.
rate derivatives book). Savings are
As mutual and hedge funds do not
have to hold regulatory capital and
mostly driven by a reduction in funding
Cost efficiencies of central clearing can
make credit value adjustments, the eco-
costs, due to multilateral risk netting
be substantially improved on a diver-
nomics are entirely driven by funding
on a CCP substantially lowering initial
sified CCP, increasing cost savings by
costs for initial margin, variations in
margin requirements. A recent quanti-
up to ~75% in the global dealer and
bid-ask spreads and client clearing fees.
tative impact study by BCBS / IOSCO
up to ~100% in the regional bank
It is assumed that both funds do not
shows initial margin reduction potentials
example compared to a baseline CCP
hold collateral eligible on a baseline CCP
of ~ 80% through multilateral risk
offering. An important driver for such
(with a narrow collateral spectrum),
netting (and shorter margin period of
additional savings is cross-margining
and incur funding costs as they need
risks) on a CCP.3 If the portfolio is split
and exposure netting between the
to upgrade collateral when moving
between two or more CCPs the netting
banks’ OTC and listed interest rate
onto the baseline CCP. The funds also
benefit would likely be lower, but
derivatives (such as Bund, Bobl, Schatz
need to pay fees to the clearing brokers.
the impact on initial margin and default
and Euribor futures) as well as cleared
The additional funding costs and
fund contributions might be offset
securities financing transactions. Further
clearing fees, however, may be more
by reduced concentration charges by
savings are driven by the default fund
than offset by reduced mark-ups on
the CCP for bigger dealers. Credit
efficiencies of an integrated cross-
bid-ask spreads charged by the funds’
value adjustments can be lowered as
product CCP model. Collateral efficien-
trading counterparties, since cost
well, with some residual CVA for
cies depend somewhat on the set-up
structures of the counterparty banks
and funding optimization of the banks
are lower of centrally cleared versus
and are only assured to a very limited
bilateral transactions.
extent, however there may be additional potential based on reuse of assets
from repo and securities lending.
3“Quantitative
impact study on margin requirements for non-centrally cleared OTC derivatives”, BCBS/ IOSCO document
on margin requirements for non-centrally cleared derivatives (BCBS242.pdf)
9
Exhibit 6: Buy-side cost savings of clearing over bilateral with initial margin (bps of AuM)
Fixed income mutual fund
Fixed income hedge fund
Cost efficiency drivers
1. Netting
efficiency
Cross-product exposure
netting and
cross-margining
1
2. Default
fund
efficiency
Integrated, segmented
default fund structure
2
3. Collateral
efficiency
Large eligible collateral
spectrum, reuse of assets &
central bank access
+35 –70% ~2.0 –2.4 bps
~20 – 35 bps
1
2
~1.4 bps
Savings on
a baseline
CCP
3
Additional
cost
efficiencies
Savings on
Eurex
Clearing
3
3
–10 bps
Savings on
a baseline
CCP
Additional
cost
efficiencies
Savings on
Eurex
Clearing
Exhibit 6 compares the cost savings of
clearing can be significantly increased
outweigh potential bid-ask spread
central clearing for the two funds on
by the additional efficiencies of the inte-
improvements assuming that addi-
a baseline CCP with product siloes and
grated CCP model of Eurex Clearing.
tional costs for banks will be passed on
narrow collateral spectrum to an inte-
There are additional netting efficiencies
to the hedge fund. Multilateral netting
grated CCP such as Eurex Clearing, with
depending on the fund’s use of listed
benefits are already largely realized in
the cost effects differing substantially
alongside OTC interest rate derivatives.
the bilateral model through prime
between the mutual and hedge fund.
Default fund efficiencies for the clearing
broker set-ups. In contrast, cost savings
brokers and counterparties of the fund
on an integrated CCP may run up to
The mutual fund incurs funding costs
may result in lower fees and improved
35 bps of assets under management –
and clearing fees when moving to
bid-ask spreads. Funding costs can be
mostly due to substantial cross-product
central clearing on a baseline CCP.
eliminated, since a sufficient amount
netting benefits between OTC and
However, these costs are more than
of the fund’s investments are eligible
listed interest rate derivatives, amplified
offset by improvements in bid-ask
with Eurex Clearing, given the large
by the hedge fund’s leverage (the
spreads – assuming the fund’s bank
collateral spectrum accepted. Total
notional of the fund’s interest rate
counterparties pass on cost savings as
additional cost savings of up to 70%
derivatives being a multiple of assets
a result of being able to net their
over the baseline CCP can be achieved
under management).
trades with the fund with other trades
using Eurex Clearing.
they have on the CCP. The net cost
savings to the fund amount to ~1.4 bps
In the case of the hedge fund, costs
of assets under management (AuM)
actually increase when moving from
on an annual basis. Savings via central
a prime brokerage bilateral model to
central clearing on a baseline CCP,
as funding costs and clearing fees
10
Differences on the buy-side are
Exhibit 7: Relationship of buy-side savings to leverage
primarily driven by the leverage in
the portfolio and CCP netting efficiencies as illustrated by Exhibit 7.
Differences in efficiencies between
Savings of cleared vs. bilateral trades
with IM in bps of investments
Non-leveraged buy-side firm
savings on Eurex Clearing
35
Leveraged buy-side firm
savings on Eurex Clearing
CCPs become more pronounced for
Hedge fund
higher leverage. For a buy-side firm
with a relatively small interest rate
derivatives portfolio compared to
10
the overall assets under management
2.5
(such as an insurer), cost differentials
are less relevant. For a more leveraged
Mutual
fund
1.5
buy-side firm such as a fixed income
hedge fund with a large derivatives
portfolio, CCP efficiencies can make
a substantial contribution to the overall
return on investment.
Insurer
Hedge fund
0.1
0.1
1.5
100
150
Leverage
(notional interest
rate derivatives
over assets under
management)
Eurex Clearing
Baseline CCP
Securities financing case studies
The next set of case studies focuses
exposure. Cost savings are substantial
on the efficiencies of moving bilateral
for repo portfolios where the bank is
(incl. tri-party) securities financing
both cash provider and cash taker and
transactions onto a CCP. Economic cost
can net on a CCP. Assuming a netting
differentials of bilateral and centrally
potential of 50% between repo and
cleared transactions are quantified for
reverse repo on a CCP, the savings
a range of representative bilateral repo
amount to around 3– 4 bps for net cash
and securities lending portfolios of
takers and net cash providers, with
global dealers and banks, taking into
improved savings on an integrated
account capital and funding costs as
CCP with higher default fund efficiency.
well as CVA.
Cost savings of central clearing without
netting can still be significant for cash
Exhibit 8 (page 12) compares the cost
takers, but only on an integrated CCP.
differentials across the portfolios on
a baseline CCP compared to an integrated CCP such as Eurex Clearing
(but abstracting from additional crossproduct netting efficiencies which are
analyzed above). Cost savings vary
across portfolios depending on the CCP
default fund efficiency, multilateral
netting potential and the bilateral
11
Exhibit 8: Securities financing cost savings of central clearing for banks
Savings of cleared vs. bilateral / tri-party securities financing transactions
in bps of gross contract size / loan portfolio
25
23.1
20
22.0
19.7
18.8
15
10
5
3.9
4.4
3.2
With GC
Pooling Select
3.7
2.9
1.7
0.2
0
–1.9
– 0.4
–5
Net cash taker
Net cash provider
General collateral repo
Pure cash taker
Pure cash provider
General collateral/special repo
Without GC
Pooling Select
Equities borrower
Bonds borrower
Securities lending
Baseline CCP
Eurex Clearing
For pure cash providers, central clearing
being substantial for portfolios which
may be more expensive with no cash
can be netted down on a CCP or which
taker positions to net, mainly driven by
create large exposures due to the risk
the default fund contribution, particu-
markups and haircuts. Calculations
larly on the baseline CCP. If the cash
based on capital requirements driven
provider uses a service without default
by the leverage ratio (as opposed to
fund requirement like GC Pooling
risk-weighted assets as above) generate
Select with a special membership for
similar results. Cost efficiencies can
cash providers only on Eurex Clearing,
be increased on an integrated CCP,
central clearing becomes more attrac-
with lower default fund contribution
tive than bilateral. Finally, for securities
and the potential to further improve
lending transactions where the credit
savings by netting securities financing
exposures can be quite substantial
with derivatives portfolios.
for the securities borrower due to high
risk haircuts, cost savings run up to
It can be expected that such cost
~20 bps on a baseline CCP, and up to
efficiencies will likely result in more
~23 bps on an integrated CCP.
attractive terms for securities lending
Centrally cleared securities financing
mutual funds, insurers and corporate
portfolios tend to be more cost-efficient
treasuries, thereby providing an incen-
than bilateral trades, with cost savings
tive to use central clearing services.
firms and cash providers such as
12
Regulatory scenarios
for the regulatory base case and
The level of the benefits of clearing
highest-impact scenario for different
ultimately depends on the final set
netting gains. In the regulatory highest-
of regulation. The quantitative case
impact scenario, clearing on a baseline
studies above assume a mid-term base
CCP is substantially more expensive.
case scenario based on the new pro-
On an integrated CCP such as Eurex
posals, implemented with necessary
Clearing, cost savings are reduced but
modifications to incentivize the use of
still substantial for higher netting gains.
the clearing model in order to support
In case the dealer splits business across
the G20 agenda.
two or more European CCPs, savings
In a regulatory highest-impact scenario
between different CCPs used. It is
depend on how netting is optimized
of the new default fund capitalization
important to emphasize that if final
and leverage ratio proposals being
regulatory requirements are too strict
fully implemented, the benefits of
in terms of default fund capitalization
clearing would be substantially reduced.
and leverage ratio, offering clearing
Exhibit 9 shows the cost savings of
services might become uneconomical
OTC derivatives clearing over bilateral
altogether, undermining G20’s ultimate
with initial margin for the global dealer
goal to centrally clear OTC business.
Exhibit 9: Global dealer cost savings across regulatory scenarios
Global dealer: Cost savings over bilateral with IM (bps of gross notional) for different netting gains (percent)
Regulatory base case scenario
Regulatory highest-impact scenario
0.4
0.4
Eurex Clearing
0.3
Business split
Baseline CCP
0.2
0.3
Eurex Clearing
0.2
0.1
0.1
0
0
–0.1
– 0.1
–0.2
– 0.2
–0.3
– 0.3
Business split
Baseline CCP
–0.4
– 0.4
85%
88%
90%
93%
95%
85%
88%
90%
93%
95%
13
Conclusion
Central clearing can create sustained
Central clearing on a baseline CCP in
cost benefits for market participants
a regulatory base case scenario is more
by lowering the sum of capital and
cost-efficient than bilateral trading
funding costs, CVA and other charges.
with initial margin, in most case studies.
The benefits depend to some extent
Cost efficiencies can be significantly
on final implementation of the new
improved on an integrated CCP along
regulations. Ongoing consultations
the three efficiency drivers in all
(especially on default fund capitalization
case studies.
and leverage ratio rules) need to be
closely monitored as they have the po-
There is a sizeable capital and cost
tential to make clearing less attractive.
efficiency opportunity for both clearing
The study expects the new regulations
members and their clients by moving
to be implemented with a view to
and pooling business across products
incentivizing the use of central clearing
on an integrated CCP. In the fixed
in order to support the G20 agenda.
income space, Eurex Clearing is the
Cost benefits are also dependent on
OTC and listed interest rate derivatives
natural hub for EUR-denominated
the efficiency of CCPs to reduce risk
as well as repo and securities lending
exposures of market participants along
transactions.
three drivers:
1. Netting efficiency: CCPs clearing
different products under a single
legal netting agreement and liquidation structure can lower capital
and funding requirements.
2. Default fund efficiency: CCPs with
integrated cross-product structures
and significant existing exposures
can lower default fund capital
requirements.
3. Collateral efficiency: CCPs with
a large spectrum of eligible collateral, the ability to reuse other
assets (e.g.GC pooling) and access
to central bank accounts, can
mitigate funding requirements.
14
Sources
Basel III – Current framework
“International Convergence of Capital
Measurement and Capital Standards”
Consultative Document,
“The standardized approach for
measuring counterparty credit risk
(bcbs128.pdf), Basel Committee on
exposures” (bcbs279.pdf), Basel
Banking Supervision, June 2006
Committee on Banking Supervision,
March 2014
“Capital requirements for bank
exposure to central counterparties”
(bcbs227.pdf), Basel Committee
on Banking Supervision, July 2012
CPSS / IOSCO
“Principles for financial market
infrastructures” (cpss101.pdf),
Committee on Payment and
“Basel III: A global regulatory frame-
Settlement Systems / Board of
work for more resilient banks and
the International Organization
banking systems” (bcbs189.pdf),
of Securities Commissions,
Basel Committee on Banking Super-
April 2012
vision, Dec 2010 (rev. June 2011)
BCBS / IOSCO
Basel III – Consultative documents
Consultative Document,
“Capital treatment of bank exposures
to central counterparties”
“Margin requirements for non-centrally
cleared derivatives” (bcbs261.pdf),
Basel Committee on Banking Supervision / Board of the International
(bcbs253.pdf), Basel Committee
Organization of Securities
on Banking Supervision, June (rev.
Commissions, September 2013
July) 2013
EMIR
Consultative Document,
“The non-internal model method for
Regulation (EU) No 648/2012 of
the European Parliament and of
capitalizing counterparty credit risk
the Council of 4 July 2012 on OTC
exposures” (bcbs254.pdf), Basel
derivatives, central counterparties
Committee on Banking Supervision,
(CCPs) and trade repositories (TRs)
June (rev. July) 2013
FSB
Consultative Document,
“Revised Basel III leverage ratio
framework and disclosure
“Strengthening Oversight and
Regulation of Shadow Banking –
Policy Framework for Addressing
requirements” (bcbs270.pdf),
Shadow Banking Risks in Securities
Basel Committee on Banking
Lending and Repos”, Financial
Supervision, January 2014
Stability Board, August 2013
15
About us
About Eurex Clearing
billion and processing a gross risk
About Oliver Wyman
Eurex Clearing is one of the leading
valued at almost EUR 15.9 trillion every
Oliver Wyman is a global leader in
central counterparties globally –
month. In 2013, we cleared around
management consulting. With offices
assuring the safety and integrity of
1.6 billion derivatives contracts.
markets while providing innovation
in 50+ cities across 25 countries,
Oliver Wyman combines deep industry
in risk management and clearing
We also provide you with highest
knowledge with specialized expertise
technology delivering superior capital
safety and efficiency as perfect basis
in strategy, operations, risk manage-
and operational efficiencies. We clear
for your OTC business: EurexOTC
ment, and organization transformation.
the broadest scope of products under
Clear offers a strong holistic solution
The firm’s 3,000 professionals help
a single framework in Europe – both
in terms of product coverage, Client
clients optimize their business, improve
listed and OTC – including derivatives,
Asset Protection, capital efficiency and
their operations and risk profile, and
equities, bonds, securities financing
ancillary services by leveraging the
accelerate their organizational per-
and energy transactions.
existing Eurex Clearing infrastructure.
formance to seize the most attractive
We at Eurex Clearing stand between
Together with Eurex Exchange,
a wholly owned subsidiary of Marsh &
opportunities. Oliver Wyman is
the buyer and the seller, which makes
the International Securities Exchange
McLennan Companies (NYSE: MMC),
us the central counterparty for all
(ISE), the European Energy Exchange,
a global team of professional services
your transactions. We mitigate your
Eurex Bonds and Eurex Repo, Eurex
companies offering clients advice and
counterparty risk and maximize your
Clearing forms the Eurex Group. Eurex
solutions in the areas of risk, strategy
operational and capital efficiency.
Group is part of Deutsche Börse Group.
Our one-stop shop offering combines
seamless post-trade services, efficient
Visit us at www.eurexclearing.com
or follow us on Twitter @eurexgroup
and human capital. With over 53,000
employees worldwide and annual
revenue exceeding USD 11 billion,
Marsh & McLennan Companies is also
collateral and delivery management
the parent company of Marsh, a global
with an industry leading risk manage-
leader in insurance broking and risk
ment – to keep you clear to trade.
management; Guy Carpenter, a global
leader in providing risk and reinsurance
16
Eurex Clearing serves more than
intermediary services; and Mercer,
175 Clearing Members in 16 countries,
a global leader in talent, health, retire-
managing a collateral pool of EUR 48
ment and investment consulting.
Contacts
UK buy side and Netherlands
Scandinavia
Ricky Maloney
Deborah Garlick
T +44-20-78 62-76 12
T +44-20-78 62-72 17
M+44-755-117 12 12
M+44-78-18 51-21 01
[email protected]
[email protected]
UK sell side and Spain
USA
Byron Baldwin
Tim Gits
T +44-20-78 62-72 66
T +1-312-544-10 91
M+44-788-465 50 89
M+1-312-929-85 88
[email protected]
[email protected]
Switzerland and Italy
Markus-Alexander Flesch
T +41-43-430-71 21
M+41-795-70 02 80
[email protected]
France, Luxembourg and Belgium
Florence Besnier
T +33-1-55 27-67 70
M+33- 610-32 74 20
[email protected]
Germany and Austria
Andreas Stadelmaier
T +49-69-211-1 38 59
M+49-172-614 77 53
[email protected]
17
© Eurex 2014
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18
© Eurex, April 2014
Published by
Eurex Clearing AG
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65760 Eschborn
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www.eurexclearing.com
ARBN number
Eurex Frankfurt AG ARBN 100 999 764